Save Some Jobs by Destroying Many More

Much of the Obama administration’s rationale for bailing out GM is that such actions will save American jobs. This is just one of the many unfortunate fallacies that stem from our century-old fiat money system.

Prior to the formation of the Federal Reserve System the American populace would have scoffed at such nonsense that the government can or even should tax all Americans in order to save the jobs of some Americans. It would have been apparent to anyone in the age of the gold standard that the government can give away only what it takes from someone else, exacting its overhead cost and throwing uncertainty of the future into the mix to boot. In the case of the GM bailout, the benefit will accrue to the unions, who bear primary responsibility for the systematic destruction of the American automobile industry since the 1930s. But the fact that we are no longer on a gold standard does not eliminate the economic truth that all of us who are not members of the United Auto Workers are being robbed by our government for the union members’ benefit.

The GM bailout perfectly illustrates why government gets away with this assault on the American taxpayers’ pocketbook. The benefit is concentrated and easily identified and quantified. The billions of bailout money will keep plants open and salaries flowing, at least for awhile. Smiling autoworkers--not all of them union members, of course—will be happy that they still have a job. I have no doubt that the mainstream media will interview them and allow them to relate how happy they are with the government’s actions.

But no one can interview the people whose jobs were lost or never created when the capital that would support them has been funneled to GM. GM has first claim upon America’s resources as the first recipients of new, fiat money. No one can interview the people who never got jobs from businesses that never expanded production, because GM has first claim upon America’s resources as the first recipients of new, fiat money. No one can interview the people who were never employed in the first place in businesses that will never be, for GM has first claim upon America’s resources as the first recipients of new, fiat money.

The GM bailout ignores the fact that capital resources are scarce. Government spendthrifts are led to this conclusion, if they ever think in such terms at all, because government can print all the money that it wishes to spend. This is the case only because our fiat money system creates the illusion that government spending is not paid by the populace. Because it prints all the money it wishes, government does not have to increase taxes or borrow honestly at high rates of interest. Under a gold standard there is no such illusion. Because gold is a part of the market economy itself, government cannot hide who must bear ultimate responsibility for what it spends—the people themselves through higher taxes now or more debt now and even higher taxes later. There is no escaping from financial truth. The GM bailout would be seen for exactly what it is—a transfer of wealth from the profitable and productive segments of the economy to an unprofitable and unproductive segment of the economy. Such a transfer destroys; it does not save anything.

The GM bailout, like the bank bailouts of the Bush administration, illustrates why government will never be the source of financial reform. Government is the biggest beneficiary of its ability to print money. It can lavish other peoples’ wealth on politically connected, high profile workers and appear to be generous and even wise for having done so. It can bail out those who cannot pay their mortgages and appear generous and even wise for having done so. It can send stimulus checks to low and middle income Americans and appear generous and even wise for having done so. Government gets to act like the ignorant Bonnie and Clyde characters of the 1930s reign of lawlessness, who claimed that they weren’t robbing people only banks…and the banks were owned by faceless rich people anyway who deserved to be robbed.

But robbery does not produce anything, whether from a Bonnie and Clyde or a duly elected government official. Those who worked and saved find their capital confiscated via the stealth tax of inflation for the benefit of those who squandered a rich heritage and show little hope that they have changed their ways. And what if they have? It is not government’s job to pick winners and losers. It is government’s job to protect our property. But instead of protecting us, government has become the thief itself.